Stock Analysis

Should You Take Comfort From Insider Transactions At Midway Limited (ASX:MWY)?

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ASX:MWY
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It is not uncommon to see companies perform well in the years after insiders buy shares. On the other hand, we'd be remiss not to mention that insider sales have been known to precede tough periods for a business. So we'll take a look at whether insiders have been buying or selling shares in Midway Limited (ASX:MWY).

What Is Insider Buying?

Most investors know that it is quite permissible for company leaders, such as directors of the board, to buy and sell stock in the company. However, rules govern insider transactions, and certain disclosures are required.

Insider transactions are not the most important thing when it comes to long-term investing. But equally, we would consider it foolish to ignore insider transactions altogether. For example, a Harvard University study found that 'insider purchases earn abnormal returns of more than 6% per year'.

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Midway Insider Transactions Over The Last Year

The Non-Executive Chairman Gregory McCormack made the biggest insider purchase in the last 12 months. That single transaction was for AU$98k worth of shares at a price of AU$0.98 each. That means that even when the share price was higher than AU$0.90 (the recent price), an insider wanted to purchase shares. While their view may have changed since the purchase was made, this does at least suggest they have had confidence in the company's future. To us, it's very important to consider the price insiders pay for shares. As a general rule, we feel more positive about a stock if insiders have bought shares at above current prices, because that suggests they viewed the stock as good value, even at a higher price.

In the last twelve months Midway insiders were buying shares, but not selling. The chart below shows insider transactions (by companies and individuals) over the last year. If you want to know exactly who sold, for how much, and when, simply click on the graph below!

insider-trading-volume
ASX:MWY Insider Trading Volume December 18th 2020

There are plenty of other companies that have insiders buying up shares. You probably do not want to miss this free list of growing companies that insiders are buying.

Have Midway Insiders Traded Recently?

There was some insider buying at Midway over the last quarter. MD, CEO & Executive Director Anthony Price shelled out AU$10k for shares in that time. It's good to see the insider buying, as well as the lack of recent sellers. But in this case the amount purchased means the recent transaction may not be very meaningful on its own.

Does Midway Boast High Insider Ownership?

For a common shareholder, it is worth checking how many shares are held by company insiders. We usually like to see fairly high levels of insider ownership. Based on our data, Midway insiders have about 4.3% of the stock, worth approximately AU$3.4m. However, it's possible that insiders might have an indirect interest through a more complex structure. I generally like to see higher levels of ownership.

So What Does This Data Suggest About Midway Insiders?

Our data shows a little insider buying, but no selling, in the last three months. That said, the purchases were not large. However, our analysis of transactions over the last year is heartening. We'd like to see bigger individual holdings. However, we don't see anything to make us think Midway insiders are doubting the company. So while it's helpful to know what insiders are doing in terms of buying or selling, it's also helpful to know the risks that a particular company is facing. For example - Midway has 2 warning signs we think you should be aware of.

Of course, you might find a fantastic investment by looking elsewhere. So take a peek at this free list of interesting companies.

For the purposes of this article, insiders are those individuals who report their transactions to the relevant regulatory body. We currently account for open market transactions and private dispositions, but not derivative transactions.

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